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DoorDash CEO Tony Xu on why profitability is his top priority

February 14, 2020, 2:19 PM UTC

DoorDash CEO Tony Xu visited Fortune’s offices this week, and he had a lot to say about the basics of good business.

Xu is the chief of a tech juggernaut valued at approximately $13 billion that’s still fighting to win in an ultra-competitive market. His rivals—UberEats, Postmates, and Grubhub—are looking to grab a slice of the food-delivery pie, but DoorDash is reportedly in the lead when it comes to growth. Now Xu says his company is big on profit, too.

“We’ve had to dial in the unit economics since day one, and make sure the business had a path to profitability long, long, long before all the headlines started popularizing this theme,” he told Fortune. “I don’t understand why everyone’s talking about [profits] now, because candidly, for us, we had no choice but to focus on a path to profitability from the beginning.”

I was skeptical of this comment because many founders—including Xu—have openly spoken about prioritizing growth over profitability. Last February, Xu told CNBC, “Right now we’re choosing to invest in growth and delay profitability for the entire company. But we have the means in which to do that and we know how to get there. But right now we want to accelerate to the number-one position sooner.”

The company had then just raised $400 million in venture funding from Temasek Holdings and Dragoneer Investment Group. The funding came a year after DoorDash raised a monster round of $535 million from backers including SoftBank, Sequoia Capital, GIC and Wellcome Trust.

This week, though, Xu heavily emphasized the importance of capital efficiency and turning a profit in spite of its war chest of capital. When I made a comment that DoorDash is not yet profitable, Xu said, “No, but we’re working our way there.”

“What I know is, delivery is not profitable,” Chris Webb, CEO of ChowNow, recently told Fortune. “It’s been the same way since these companies started.”

Xu hopes to be the first in his industry to change that trend. “As a founder, you can’t be confused. You have to know how to grow efficiently,” emphasizing that DoorDash is hyper-focused on its unit economics.

Profitability is a hot topic these days. I recently wrote about scooter startup Lime’s plans to lay off 14% of its staff—approximately 100 people—as it pulled out of a dozen markets in the U.S. and abroad. At the time, co-founder and CEO Brad Bao said, “Part of realizing our vision to transform urban mobility is achieving financial independence; that is why we have shifted our primary focus to profitability.” So has Bird. So has WeWork. So has Fair.

In the past, venture capital firms that fund unicorns (or decacorns) like DoorDash have had a much higher tolerance for forgoing profitability for growth, but as more and more of these unicorns trot–and stumble—to the public markets, the sentiment has begun to change.

Xu declined to comment, but there’s been talk that DoorDash will go public in 2020. We might have much more insight into its business fundamentals sooner rather than later.

HOUSEKEEPING: Term Sheet won’t be in your inbox on Monday for the Presidents’ Day holiday. Additionally,I’ll be out of the office on Tuesday and Wednesday, so please send deals for inclusion to my colleague Lucinda Shen at lucinda.shen@fortune.com.

VENTURE DEALS

- Flywire, a Boston-based vertical payments company, raised $120 million in funding. Investors include Goldman Sachs, Tiger Management and Adage Capital Management.

- Astranis, a San Francisco-based satellite Internet startup focused on bringing overlooked parts of the world online, raised $90 million in funding ($40 million in equity and $50 million in debt). Venrock led the round, and was joined by investors including Andreessen Horowitz. Read more at Fortune.

- GumGum, a Santa Monica, Calif.-based provider of in-image advertising and visual intelligence solutions, raised $22 million in funding. Investors include Morgan Stanley Expansion Capital, NewView Capital and Upfront Ventures.

- Datometry, a San Francisco-based developer and operator of a database virtualization platform, raised $17 million in Series B funding. Investors include WRVI Capital, Dell Technologies Capital, Redline Capital, and Acorn Pacific Ventures.

- UrbanFootprint, a Berkeley-based intelligence and urban planning software, raised $11.5 million in Series A funding. Investors include Valo Ventures, Social Capital, and Radicle Impact.

- Reggora, a Boston-based residential appraisal software, raised $10 million in Series A funding. Spark Capital led the round, and was joined by investors including Boston Seed Capital. 

- Esper.io, a Bellevue, Wash.-based company providing a devops platform for dedicated edge Android devices, raised $7.6 million in Series A funding. Madrona Venture Group led the round, and was joined by investors including Root Ventures, Ubiquity Ventures, Haystack Ventures, and Pathbreaker Ventures.

- Lover, a personalized sexual health app, raised $5 million in seed funding. Lerer Hippeau led the round.

- n2uitive, a Seattle-based claims interview and recorded statement management platform for auto, home, and workers compensation insurers, raised $1.3 million in funding. Cascade Seed Fund led the round.

OTHER DEALS

- Citizens Financial Group, a Providence, R.I.-based  agreed to acquire assets of Trinity Capital, a Los Angeles-based advisory firm.

IPOs

- TFI International, a Canadian transportation and logistics company in North America, raised $200 million U.S. IPO. It offered 6 million shares priced at $33.35 apiece, based on its last closing price trading on the Toronto Stock Exchange. The firm posted revenue of CAD$5.2 billion ($3.9 billion) and income of CAD$310.3 million ($232.9 million) in 2019. It plans to list on the NYSE as “TFII.” Read more.

- MyTheresa, an online luxury fashion retailer, is preparing for an IPO on the NYSE, Reuters reports citing sources. Neiman Marcus, backed by Ares, is behind the firm. Read more.

- Vivendi, the French media conglomerate, said an IPO of its Universal Music Group subsidiary is planned for early 2023 at latest. Read more.

- Eccellenze Italiane Holding, Italian holding company behind Blumarine and Liu Jo, is aiming for an IPO within two years. Read more.

- CVC Capital Partners is weighing options to sell or list Douglas, its German perfume and cosmetics retailer, Reuters reports citing sources. Read more.

EXITS

- Flywire acquired Simplee, a Palo Alto, Calif.-based healthcare payments technology platform. Financial terms weren't disclosed. Simplee had raised approximately $37.8 million in venture funding from investors including Social Capital and Heritage Group. 

- TA Associates acquired Auction Technology Group, a London-based online platform for auctions in Europe and the United States, from ECI Partners. It also acquired Proxibid, an Omaha, Neb.-based online marketplace, from Primus Capital. The companies will be brought under the ATG umbrella. Financial terms weren't disclosed.

FIRMS + FUNDS

- Odyssey Investment Partners, a New York-based private equity firm, raised $3.25 billion for its private equity investment fund, Odyssey Investment Partners Fund VI, LP.

PEOPLE

- Odyssey Investment Partners promoted Jeffrey McKibben and Craig Staub to Senior Managing Principal. Jason Cowett, Jonathan Place and Jeff Moffett have been named Managing Principal.

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